TABLE OF CONTENTS

INTRODUCTION CASE STUDY: COFFEE-MATE CONCLUSION REFERENCES

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INTRODUCTION

Segmentation, targeting, differentiating and positioning are the main 4 approaches in choosing the right marketing strategy for the chosen consumer market. There are many marketing researchers, who propose the best way for building proper marketing strategy, but its up to the particular marketing manager of a company to create a special way of promoting his companys products in order to place them in a unique target segment against the competitors. As Philip Kotler et al. (2008) define the main purpose of market segmentation as dividing a market into distinct groups of buyers with different needs, characteristics or behaviours, who might require separate products or marketing mix. During the process of market segmentation and target marketing the marketer should be well aware of the companys objectives, resources, capabilities and competition strength against the rival companies. It is achieved by undertaking the internal and external analyses. When the market specialist has done these analyses and has a clear image of the companys position in the whole product market, he may start building a specific marketing strategy. Donald J. Bowersox and M. Bixby Cooper (2008) state: Effective market segmentation requires that the marketer clearly identify the groups or segments to which products may be offered and chose the group (or groups) that the firm will attempt to serve. There are numerous ways of market segmentation. The most popular types of segmentation are (P. Kotler, 2008): 1. Demographic segmentation by sex, age, income, occupation, education, race and ethnicity, family household, etc. 2. Geographic segmentation by nations, regions, states, cities and even neighborhoods. 3. Psychographic segmentation based on social class, lifestyle & personality.

4. Behavioural segmentation based on consumers knowledge, attitude, use, or response to a product. It is really hard to identify certain specific criteria for a particular market segment under which the marketer should do his research. The possible variations of criteria are very broad. Ashok Ranchhod and Galin Gurau (2007) referring to Frank et al (1972) indicate the segmentation criteria in terms of general customer characteristics and more market-dependent or situation-specific customer characteristics: Customer-specific Cultural, geographic, and socio-economic variables Product-specific User status, usage frequency, brand loyalty, store loyalty, and patronage, usage situation Psychographics, benefits, perceptions, attitudes, preferences, and intentions

Observable

Unobservable Psychographics: personality and lifestyle

The same authors used quantitative and qualitative variables of consumers behaviour originally proposed by Van Raaji (1982): quantitative variables include geodemographic and economic factors, size and type of customer; qualitative variables are such as psychographic and behavioural factors, and benefits sought; they may be used singly or in some combination. In managing a product-market relationship one must consider all these variables and criteria to build the companys unique position in the market and for being successful and strongly competitive. The decision-making process is usually limited by firms budgeting, so it is important to identify the key market segment that have better attractiveness and then to decide what other segments can also be served.

CASE STUDY: COFFEE-MATE

1. What are the main benefits of Coffee-Mate and what is limiting its sales?

Coffee-Mate is the leading brand of coffee creamers. It holds 55 percent market share. The main benefits of Coffee-Mate are that it doesnt have the poor taste of regular dry milk that turns lumpy in coffee. With the coffee creamer people save on using sugar, because it has already sweet taste. It also has reach creamy taste, and many loyal users consider it almost as a treat improving the coffee flavour. Coffee-Mate is considerably cheap and available in every local store. Besides, it has longer life in comparison to milk. But the main reason limiting its sales is peoples discredit of dry milk. They perceive it to be a poor substitute of cream and milk worsening the taste of coffee. Coffee-Mate has a lot of artificial ingredients for its prolonged storage. Buyers are also concerned with their health blaming Coffee-Mate is too caloric and artificial. Coffee-Mate is perceived to be too close to cream in its taste and texture that is unhealthy for people watching their weight. Non-users also blame Coffeemate to be very powdery and have bad taste dimming coffee flavour in comparison too milk. Because of that many buyers have Coffee-Mate at home in case they run out of milk. According to Coffee-Mate webpage (2010), Nestle provides the coffee creamer not only powders, but also in liquids, concentrated liquids, sugar-free and reduced fat, with 17 different kinds of flavours. It is clear that Nestle targets at different segments with different needs and wants.

2. Should Coffee-Mate be mass-marketed, aimed at one segment or aimed at multiple segments?

In todays world mass-marketing is becoming less and less effective, since a lot of new competitive products are entering the world market, and it is of crucial importance to distinguish your companys products in a unique way oriented to particular market segments. That is why marketers should do

more work in market research and smart market segmentation in order to position the products in a special place so that to create a value in consumers minds. The case study of Coffee-Mate showed that main users of the coffee creamer are heavy drinkers of different kinds of coffee. In order to capture more profits of sales Coffee-Mate should aim at multiple segments. Its market segmentation should have geographic, demographic, psychographic and behavioral variables. Geographically the company should develop its market accordingly to areas where the most coffee is consumed. For example, if in UK people tend to have coffee averagely 3 kg per head, in the Benelux countries and Scandinavia it is 11-13 kg per head. Correspondingly, Coffee-Mate sale is affected by annual coffee consumption in different countries and should intensify its development where the most coffee is consumed. Another important segmentation is psychographic. Coffee-Mate should influence its customers to buy coffee creamer of exactly this brand not another one. Persons personality plays important role in this case. People of active lifestyle, gregarious and of average social class tend to drink more coffee and use coffee creamers. Consumers attitude towards coffee creamer plays crucial role in their buying decision making. Thats why Behavioural segmentation must be used. Some people dont like the powdery taste of dry milk and they believe coffee creamer is just the same. They also dont trust Coffee-Mate blaming it to be too fattening. Coffee-Mate should target consumers with better attitude towards coffee creamers. There is no strong demographic bias among coffee creamer buyers but a slight tendency towards 4564-year-olds living in two-person households without children. Heavy users of Coffee-Mate are 45+ years old, have slight bias towards lower social class, 2-3-persons households with children. Users of Coffee-Mate Lite are mostly full-time working housewives and households without children, aged 4564. Nestle proved itself to be a very good specialist in targeting its customers. As an example, Eventmarketer online magazine (2010) informs Nestle Coffee-Mate hit the road to bring its caf

experience in four major African American US markets. It participated at the Essence Music festival in New Orleans, the National Black Art Festival in Atlanta, the African Festival of the Arts in Chicago and the Congressional Black Caucasus in Washington D.C. where consumers could try new CoffeeMate samples and learn new recipes of cooking treats with adding Coffee-Mate. Recipes are also available online. To access online resource people provide their personal data that is captured by companys specialists for further research of its market.

3. Evaluate segments from TGIs user survey for target attractiveness and their fit to Coffee-Mates strengths. Which of the segments would you target and why?

The main variables of TGIs survey in evaluation for target attractiveness were the following: age, income, social class, shopping activity / budgeting, concerning about environment and health, social places, areas of households, children in family, occupation, level of coffee consumption, travelling and activities. According to TGIs user survey there are five potential consumer groups for Coffee-Mate. Sarah and Anna affluent, young foodies (24, 4 %) is a leading group of Coffee-Mate consumers. These people are of age 35-54, earn above average income and dont have to budget. They mostly live as singles, in one-two-person households. They are heavy users of coffee and ground coffee. Eileen and Mary cost constrained, older, conservative (23, 6%) are very close to the first group in consuming potential but differ significantly in lifestyle and demographic features. They are very price aware; try to eat healthy organic food; light users of instant coffee and average users of dried milk. They have age of 55 and above, retired and live in one-two-persons households in multi-ethnic areas. They are very conservative and not sociable.

Dorothy and Amy affluent (22, 7%) is a consumer group very close to the first two. They are welloff and dont have to be price conscious. Most likely to buying Coffee-Mate, light users of ground coffee and use cream as well as creamers. They are 55+ and have a reasonable household despite being retired. They do not want to try new things and are not very indulgent. Sharon and Tracy experimentalist (15, 4%) enjoy themselves, heavy users of instant coffee, average users of Coffee-Mate. They are of middle income, 15-44, have households with children, gregarious, love shopping and travelling. Dawn and Lisa cost constrained young families (13, 9%) is a consumer group of low income, remotely concerned about health and environment. They are heavy users of instant coffee and belowaverage users of creamers, aged 15-34, live in industrial areas in households with children. Perhaps most important, heavy users may differ significantly from average or infrequent users in term of their motivation to consume, their approach to the brand, or their image of the band (Thomas C. OGuinn et al, 2008). Having analyzed these potential consumer groups, it may be predicted that Sarah and Anna may later become Dorothy and Amy, because with getting older they probably will still continue buying Coffee-Mate but not as much since they will become more health aware. Eileen and Mary group is a loyal user group, which is likely stay with their choice since they are very conservative. Dawn and Lisa looks like a prospective consumer group since they dont worry very much about their health and try to save money. But, on my point of view, the consumer group that has most attractiveness is Sharon and Tracy because they are more likely to become Sarah and Anna. Sharon and Tracy group consumes heavily instant coffee and likely to consume more ground coffee. They are people of middle income who like to enjoy themselves and not to save on shopping spending average to high amounts on the main grocery. They are also a one-two-children-family that most likely will leave their homes when they get older. What also important is that this consumer group likes to try something new whatever it is and thats why they would like trying different flavours of Coffee-Mate and recipes of treats.

4. Evaluate the proposed ad for target market and benefits promoted. Will the ad help propel Coffee-Mates further growth? Create an alternative ad for your chosen target market.

The proposed ad for target market promotes that, when there is no milk or cream for coffee, there is always Coffee-Mate that even has better taste qualities than regular milk. The ad says: Coffee-Mate, never be without it! that means Coffee-Mate always to become handy in having guests or just for yourself. It looks that this ad would not target potential consumer group that are non-users or very light users, because the ad underlines that Coffee-Mate is useful only when there is no milk around. Does it mean that this creamer should be consumed only on special occasions or when there is nothing else to put in coffee? In my opinion, non-users and light users would ask themselves the same question. Another ad of Nestle that was launched in 2007 is Coffee-Mate Nestle: Even when there's milk around (AD punch. Attitude. Advertising. Glitz, 2007). The ad shows in a funny way a cowboy sipping his coffee with Coffee-Mate that made cows hostile him to see the alternative to milk. Cows are jealous and want to hurt a person having Coffee-Mate. The ad looks better in comparison with the first ad because it shows that Coffee-Mate is nice to have even when theres milk around. So it would target more consumer segments. To target Sharon and Tracy consumer group it is important to remember that these people are experimentalists so they like everything new and unusual. My proposed commercial ad: Two alpinists (a man and a girl) are climbing on the top of a great mounting with breathtaking views around. They are exhausted and want to have coffee for a short break. Pouring their coffee into cups the man reached Coffee-Mate out of his backpack. The man and girl are sipping their coffee sitting on the edge of a cliff enjoying a magnificent view. Light music on the background. No words. Just action.

And voice behind the scene at the end: Coffee-Mate: everywhere with you to accomplish your enjoyment with life to the fullest!

CONCLUSION

There is no single company that can serve all the customers at the same time, especially in the modern competitive world when the growing market is characterized by more complex fragmentation and intense competition. Thats why marketing segmentation and targeting is one of the most important marketing activities that must be implemented by a market specialist in order to capture good profits and make the company to be successful and competitive. There is no special way of market segmentation that every marketer can undertake. But it is very important for marketers to develop a particular way of segmentation and serving the particular target consumers in a chosen market segments with properly developed strategy. In order to do this, marketer researcher must carefully analyze companys resources, capabilities and readiness to serve specific market segment against competitors and place its product on valuably in a consumers mind.